The manufacturing center
OEM: the most important way to expand for multinationals in modern society
OEM can be translated directly into English as "Original Equipment Manufacturing". The method of typical OEM is like this: the OEM manufacturer who owns the original equipments (that is the consignee) produces products with its own equipments according to consigner's requirements and delivers goods with consigner's logo. In the whole process, the producer only obtains the fees of process without the right to distribute the goods. The consigner controls the marketing system, brand or tangible assets. The former gets the fees of process only and the later is rewarded from product design to marketing.
OEM belongs to the business model of outsourcing, which is popular in today's international market. Outsourcings are actually a process of searching for outside resources and reallocate them. In this process, enterprises can reduce cost by reallocating important but not core elements. With the acceleration of world economy globalization, OEM/ODM has developed rapidly, expanding from developed countries to developing countries, from traditional manufacturing industry to heavy industry and from low-tech industry to hi-tech industry.
Up till now, OEM has become the important carrier of international work division. Nearly all the famous multinationals make use of this form to advance their strategies of globalization. In the sports costume industry, products run by business giant such as Nike and Adidas are all the outcome of OEM. In the retail industry, products sold by the biggest retailer Wall-mart are mostly produced by OEM manufacturers; in the computer industry, IT giants such as IBM in American, and Toshiba in Japan , more than half of their products belong to OEM/ODM. Even in the toy industry, OEM/ODM is found as well. The most well-known is Barbie. As the most popular toy in western world, most of its products are OEM.
From an objective view, multinationals can avail of the advantages through the method of OEM. To be specific, large multinationals naturally possess the ownership advantage including unique mature technology or knowledge property. Through the search for OEM enterprises overseas, multinationals take advantage of local essential elements and investment surroundings to localize their products. In this way, production cost is decreased.
OEM: Important Steps of globalization for China Enterprise
In the wake of OEM, China enterprises are inevitably involved. OEM in China are mainly divided into two kinds: one is OEM/ODM for multinationals úČ and products are sold overseas. The other is to produce and sell products in China. The former form makes up the main body of our processing business. The later one is becoming the main approach to occupy and expand China market. At present, OEM products are nearly everywhere in the consumption market from clothes, toys, to home appliance and structural materials. In recent years, 400 enterprises of 500 top strong businesses in the world have moved their assembly lines to China. The big giants of world clothes such as Pierre Cardin and Valentino produce most of their products in Guangdong, and Zhejiang province, China. Furthermore, 60% of Nike sports shoes are produced in China and Nokia now has 5 production bases in China mainland. The famous computer giants like IBM, TOSIBA and DELL has also established assembly plants in China.
To sum up, OEM/ODM has occupied quite a large share in export business and local sale of China enterprises. Taking part in OEM/ODM, China enterprises may acquire a lot of benefit from many aspects. Presently, benefits in the following aspects are especially obvious.
First of all, taking advantage of the low cost, China manufacturers can enter into the global production system more easily.
Secondly, China manufacturers can absorb the essence of multinationals and improve their technology level to meet international market challenge.
Finally, China manufacturers can regulate their production method according to international demand, and enhance their management level.